Unlocking the Secret to Stock Returns: How Value Firms Outperform
The article explores why some stocks have higher returns than others. By studying how people's habits affect stock prices, researchers found that firms with lower productivity can eventually have higher profits, leading to higher stock returns. This is because the value of these future profits is influenced by changes in risk. Evidence shows that these value firms indeed have higher cash-flow growth and their returns are more sensitive to changes in risk.